World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Wednesday, February 25, 2009

Probably the most important part of this report is the build in inventories. My contention is that there are a lot of pent up sellers who are simply stuck. Any strength will be met with supply as people strive to escape underwater positions.

Need to change jobs and move? How does that happen if you are underwater? That’s why these things don’t resolve quickly… the inventory just keeps coming.

Purchases fell 5.3 percent to an annual rate of 4.49 million, the fewest since 1997, from 4.74 million in December, the National Association of Realtors said today in Washington. The median price dropped 15 percent from a year ago, and distressed properties accounted for 45 percent of all sales.

Americans may have been waiting for details of President Barack Obama’s plans aimed at stemming foreclosures and declining home vales that are at the core of the economic slump, the group said. The housing slump is likely to deepen as concern that record foreclosures will bring prices down even more and a lack of credit keep prospective buyers at bay.

“Housing is still going to have a rough patch in 2009,” Rudy Narvas, a senior economist at 4Cast Inc. in New York, said before the report. “Inventories are still high so you’re going to have pressure on prices.”

Economists forecast resales would rise to a 4.79 million annual rate, according to the median of 70 projections in a Bloomberg News survey. Estimates ranged from 4.5 million to 4.91 million.

Sales were down 8.6 percent compared with a year earlier.

The number of unsold homes on the market at the end of January represented 9.6 months’ worth at the current sales pace, up from 9.4 months at the end of December.

BreakdownResales of single-family homes decreased 4.7 percent to an annual rate of 4.05 million. Sales of condos and co-ops dropped 10 percent to a 440,000 rate.

Purchases declined in three of four regions, led by a 15 percent decline in the Northeast. Sales were unchanged in the West.

Home sales have been falling since 2005 and prices peaked in 2006. The S&P/Case-Shiller home-price index of 20 metropolitan cities was down 18.5 percent in December from a year earlier, a record decline, the group said yesterday.

The drop in prices and declining mortgage rates have made buying a home more attractive. The National Association of Realtors affordability index reached a record high 158.8 in December.

The average rate on a 30-year fixed mortgage fell to a record low 4.96 percent in the week ended Jan. 15, according to Freddie Mac.